Aviva has finalized an agreement to acquire its competitor, Direct Line, in a landmark £3.7 billion transaction, solidifying its position as a dominant player in the UK insurance market.

The FTSE 100-listed insurer initially made a £3.3 billion bid in November, which was rejected. Persistent negotiations led to the revised offer, culminating in the deal just ahead of a Christmas Day deadline.

This merger creates a formidable force in the motor insurance sector, with the combined entity covering over 20% of the UK market. Aviva CEO Amanda Blanc described the acquisition as “excellent news” for customers of both companies.

“Aviva and Direct Line share a strong commitment to delivering exceptional customer service, which will remain a top priority after the acquisition,” Blanc stated. “The financial strength and scale of the combined group will provide competitive pricing, enhanced claims experiences, and superior service for our customers.”

Under the terms of the deal, Aviva will pay 129.7 pence in cash and 0.2867 of its shares for each Direct Line share, with an additional dividend payment of up to 5p per share for Direct Line shareholders. Upon completion, Aviva shareholders will own 87.5% of the newly formed company, while Direct Line shareholders will hold 12.5%.

Shareholders from both companies are set to vote on the merger in March 2025, with the transaction expected to conclude by mid-2025.

Direct Line Welcomes the Deal

Danuta Gray, Chairwoman of Direct Line, called the agreement a testament to the company's appeal and value. She noted the board’s satisfaction with CEO Adam Winslow’s leadership, under which Direct Line has been executing a turnaround strategy since March.

“This offer provides shareholders with the opportunity to realize the value of their investment promptly,” Gray said.

Direct Line has faced several takeover bids in 2023, including one from Belgian insurer Ageas, which it successfully rebuffed. The company, which also owns brands like Churchill and Green Flag, has since implemented £100 million in cost reductions and cut 550 jobs to streamline operations.

Winslow expressed confidence in the merger, calling Direct Line an “excellent business” with a portfolio of beloved brands. “The combination of Direct Line and Aviva will create a stronger, larger business that remains deeply focused on serving customers and supporting employees,” he said.

The merged entity is poised to thrive in the competitive UK general insurance market, leveraging its enhanced scale and shared commitment to excellence. Photo by Rept0n1x, Wikimedia commons.